In both cases, the region imported power from Central-Western Europe via the Austrian-Slovenian, Austrian-Hungarian, Slovakian-Hungarian and Italian-SEE borders.
However, he explains, the total import which grid was able to sustain in hours from 20h to 24h was 800 MW lower in 2024 than in 2021.
“This shows that the effective grid capacity from Central-Western Europe was lower than it was in 2021 and this was the most unexpected factor which happened as of July 8 fueling extreme HUPX prices,” Kosorić says, and adds that the total import of the SEE region wasn’t much higher than it was during the heat wave of July 2021 – 4,400 MW.
Flow-based market coupling is key
According to the analysis, Flow Based Market Coupling (FBMC) is “forcing” Hungarian bidding zone to produce more energy by giving to HUPX higher price, however it cannot produce more irrespectively to the HUPX price. FBMC doesn’t let Hungarian market to import more in the welfare optimization, Kosorić said.
The analysis showed there is plenty of grid capacity from Croatia and Slovenia to Hungary, but that such transactions would increase Hungarian imports, which would not be favorable for the welfare optimization. Namely, traders cannot nominate energy anymore from the Croatian to the Hungarian market, so the prices on the two markets cannot be equalized as in the net transmission capacity (NTC) coupling mechanism.
Data show FBMC bilateral flows from Europe to Hungary was greatly reduced after July 8, by 1,200 MW to 1,300 MW, in the riskiest hours from 19h to 24h.
Kosorić expressed the belief that the only way to boost power flows to the Hungarian market bypassing the FCBM mechanism is via the Serbian-Hungarian border, but the link was slashed from 800 MW to 200 MW.
The other options are increasing the FBMC capacity, though Kosorić points out that there is no timeline for it, and cutting exports to Ukraine from Hungary and Romania.
Interconnection reductions in the region have other causes as well. The maximum Bulgaria-Romania cross-border capacity was weakened to 1,200 MW from 1,700 MW due to maintenance, scheduled until July 22. Therefore Romania relies on Hungary for supply but, as Kosorić put it, in a very nonintuitive way.
FBMC enables much lower prices on OPCOM than on HUPX
From 18h to 24h, all available selling offers on the Romanian market were taken and the only solution within FBMC was to nominate a high commercial flow from Hungary to Romania.
However, it was nominated in a highly counterintuitive manner as FBMC enables much lower prices on OPCOM than on HUPX, sometimes by as much as EUR 250 per MWh, in the direction from HUPX to OPCOM, according to Kosorić.
In his view, FBMC sometimes results in non-intuitive flows, resulting from the coupling of markets in the direction from bidding zones with higher to ones with lower prices. Such flows, Kosorić said, usually occur when the loss of economic welfare resulting from the non-intuitive flow is smaller than the economic welfare gain of congestion relieving, he adds.
Ovi tokovi se, prema njegovim rečima, obično dešavaju kada je gubitak pomenute optimizacije benefit, koji je rezultat neintuitivnog toka, manji od ekonomske koristi od ublažavanja zagušenja na mreži.
Since Romanian bidding zone is not connected to any other Core region bidding zone but Hungarian and congestion is not relieved with HU>RO flow since congestion is not on ROHU direction, the reason for such non-intuitive solutions is probably a complete absence of any available offer on Romanian market.
The non-intuitive Hungary-Romania flow is most probably not a consequence of economic welfare optimization against the welfare gain which would come from the congestion relief, Kosorić explains.
Grid capacity isn’t the only issue
The issues are not limited to the transmission grid. According to the analysis, the high prices achieved at all the power exchanges could be caused by multiple factors.
Interestingly, imports in the region were the same as in the heatwave of 2021, but many other parameters are different. It imported electricity at 700 MW from Ukraine, but now it is exporting at 800 MW to Ukraine and Moldova.
There is now much less cheap electricity in the region from coal plants
Kosorić noted that coal power plant capacity in the region has dropped by 2,000 MW, cutting the availability of cheap electricity. The return of a 1,000 MW reactor in the Kozloduy nuclear power plant to the grid was delayed by three weeks. The synchronization began on July 8 and the unit reached full and stable production only on July 10 in the afternoon.
Kosorić concluded that current prices on HUPX in the hours H20, H21 and H22 are a consequence of the grid’s inability to physically deliver additional energy to Hungarian and Romanian markets, and that they are not related to real energy generation costs.
The current prices in the hours H20, H21 and H22 on other markets in the region are also not a consequence of real production costs, but elevated offer prices, he says.
What to expect in coming weeks
Kosorić doesn’t expect anything to change over the coming weeks.
“Next week will be even warmer than this one, with no other important structural changes, so the region will remain highly sensitive. Transmission grid limitations within the FBMC mechanism can get even stronger due to overhauls in Central European grids, while hydropower output is falling and solar power generation is at its maximum,” he says.
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Publish date : 2024-07-12 23:00:14
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